Black Investors Reduce Stock Holdings

Black investors are becoming more financially conservative than their White counterparts, according to an annual Ariel-Schwab survey of households earning over $50,000 annually. Stock market investing has taken a downward turn among the African-American community, dropping 13 points in a year, while White stock ownership remains virtually unchanged.

Do you personally, or with a spouse,
have any money invested in the stock
market right now, either in individual
stocks or in a stock mutual fund?
Black White
1998 57% 81%
2000 64% 82%
2001 69% 79%
2002 74% 84%
2003 61% 79%
Note: % answering “yes”
Source: Ariel-Schwab

Ariel President Mellody Hobson said the latest survey indicates that after experiencing their first bear market, and an especially severe one, many Black investors retreated to their conservative bias. “The recent gains African-Americans have made to become more active stock investors have largely been erased by our more conservative investing tendencies as the market has dropped. This current rally offers some hard lessons to people who pulled out.”

The survey of 500 Black and 500 White households conducted during early 2003 revealed the different investing patterns and objectives between the two groups. While both sets of investors indicated retirement as their strongest goal, more than twice as many Blacks were concerned about leaving money to heirs than Whites.

Of the following, which would you say
is your most important goal in saving
or investing money?
Black White
To leave money to your children or heirs 12% 5%
To obtain a better lifestyle 14% 11%
To be prepared for an emergency or future need 18% 15%
To send children to college 18% 13%
For retirement 38% 56%
Source: Ariel-Schwab

The report cites several reasons for discontent with the stock market – not all of which are race-related.

“A myriad of factors chased many investors – Black and White – from the stock market. Yet the recent market upswing shows that you may have to go through some valleys to reach the peaks. It’s important to be patient, keep a long-term view and stay invested,” said Schwab vice president Carla A. Foster.

The high unemployment rate has considerably impacted the African-American community at a rate that is twice as high as Whites – 10.8 percent vs. 5.4 percent, according to the U.S. Dept. of Labor – and driving investors out of the stock market.

While 82 percent of Blacks and 89 percent of Whites remain optimistic about their financial future, both are nearly equally concerned about corporate scandal and its long-term impact on investing.

Propelled by the lowest interest rates in 35 years, Blacks and Whites are considering real estate for investment purposes. The 2003 survey found that 50 percent of Blacks and 44 percent of Whites call real estate “the best investment overall,” compared to 49 percent of Blacks and just 31 percent of Whites in 2002.

Among investors, 25 percent of Blacks and 31 percent of Whites sold some of their stocks or mutual funds in the past year, though the survey suggests that very few Whites cashed out completely. The survey found that younger, lower-earning Blacks are the most likely group to have left the market. Additionally, 48 percent of Blacks and 27 percent of Whites planned on shifting more of their portfolios into cash.

“Many investors have moved assets into cash or real estate, including their home. While most Whites simply diversified, some Blacks got out of stocks altogether. But as we’ve seen with the current market rally, you also need to be invested in stocks, bonds and mutual funds to benefit from the future growth of the economy,” commented Scwab’s Foster.

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